JOHN AVALOS: My radical idea is to create a municipal bank, a public bank, here in San Francisco, much like the state of North Dakota has their own state bank in North Dakota.

HOLLY KERNAN: And so how would it work?

AVALOS: Well, the North Dakota model is one where the bank, the state bank, provides what are called “partnership loans” to small financial institutions. It’s not like a retail bank, where you have your ATM card with the State Bank of North Dakota. It’s a bank that provides the support for these other institutions to do loans for small businesses and small property owners and parts of the local economies around the state of North Dakota.

KERNAN: And you have a big stumbling block, which is that the state of California prohibits this...

AVALOS: That’s right. The state of California requires that local municipalities and counties are prudent with their public dollars, which is totally understandable. But is there a way for us to be prudent and still allow us to leverage our public dollars to support our local economies? That’s what we’re going to be exploring with the state of California in the next year or so.

KERNAN: And how much money are we talking about here? How much money does San Francisco have invested in Bank of America, Wells Fargo, and...

AVALOS: And Union Bank. Our city budget is $6.8 billion, but then we have other investments that we have that on a yearly basis. I think are about $11 billion all together. Most of those dollars are in Bank of America, and part by Wells Fargo. We have many, many accounts in all these different banks, but the way that the city runs its financial transactions – a lot of that money is cleared out from these banks on a daily basis. The banks get the money and do transactions to pay our bills, to pay employees, they do all the contract work where money exchanges hands for the city, and then the money is cleared out to other institutions, where the money is invested – very low rate-of-return, but very stable investments.

So, you know, there’s a lot of research we’re going to have to do to crack the nut about how we create our own municipal bank. It’s not something that we’re going to be able to do in a few months time. And so given the fact that we have to change state law to be able to do it, we have a lot of time, a lot of room, to make sure that we do something right, we do it effective, we take steps to do it incrementally. It’s a radical idea, but one that will take a lot of effort and work to create.

KERNAN: And would the city make revenue off of this? I read that the bank of North Dakota made $300 billion in the past decade.

AVALOS: Yeah, the idea is that… is there a way that we could actually build or create a revenue stream through our local bank? That is certainly what we would like to achieve with this idea in San Francisco. North Dakota actually has a surplus where other states do not have surplus with their state budgets. And North Dakota also has a really low unemployment rate. People think North Dakota is just a very rural state, just a farming industry, but it actually has a lot of high tech and has a lot of other industries there as well.

KERNAN: Are there other risks to getting into the banking business?

AVALOS: Well, if you talk to the Chamber of Commerce, the Chamber of Commerce says, “If you pull your money out of these financial institutions then you’re going to force these institutions to go elsewhere, you’re going to lose jobs here in San Francisco.” And right now, that’s the biggest threat of creating any change in this city, is that you’re jeopardizing jobs. And it’s something that, as an elected official and a politician, I have to listen to that all the time and weigh how real that is, or not.

KERNAN: So even though this idea is a long way off, even if it were to be realized, I would imagine just floating is going to have the large banks begin lobbying against this idea. Is there a middle ground here where you could have some clout with the banks and their lending practices?

AVALOS: I have not yet reached out to the banks. I expect that we’ll start that process soon. I know that a lot of the banks feel somewhat put upon by the changes that are coming, that are being proposed, or the ideas that are being generated by the Occupy Wall Street movement and the idea that these banks have benefited from a federal bailout with our tax dollars. And a lot of people, the 99%, don’t feel that these banks have done enough to really support our local economy, to help support households from defaults and foreclosures, are not being flexible enough to support the 99%. That’s part of the dialogue.

So I think that gives me some ability and power to be able to come to the table with a lot of the banks and for the banks to start thinking about they could be more flexible. I understand there are huge constraints that the banks have as well about how they’re going to do their loans and about the whole loan crisis we have right now. We’re not doing a lot of lending right now with these banks. But certainly these banks have to respond to the pressure that’s coming up. They have to respond also to their responsibility, about how they use our public dollars to support people all over the country.

You can hear more of Supervisor Avalos’ thoughts on progressives in San Francisco, the mayor’s race, and the effectiveness of ranked choice voting, here.

Radical Idea: The public bank of San Francisco

Economic unrest is at the heart of social movements taking place around the country. But in San Francisco, that wasn’t enough to shake up the political establishment. When voters went to the polls last week, political incumbents carried the day, with George Gascon taking the race for district attorney, and appointed Mayor Ed Lee winning four more years in office.

While those top offices won’t change, the runner up to Lee, City Supervisor John Avalos, isn’t satisfied with the status quo. The popular progressive politician wants San Francisco to take control of its own finances, in part, by creating city–run municipal banks.

JOHN AVALOS: My radical idea is to create a municipal bank, a public bank, here in San Francisco, much like the state of North Dakota has their own state bank in North Dakota.

HOLLY KERNAN: And so how would it work?

AVALOS: Well, the North Dakota model is one where the bank, the state bank, provides what are called “partnership loans” to small financial institutions. It’s not like a retail bank, where you have your ATM card with the State Bank of North Dakota. It’s a bank that provides the support for these other institutions to do loans for small businesses and small property owners and parts of the local economies around the state of North Dakota.

KERNAN: And you have a big stumbling block, which is that the state of California prohibits this…

AVALOS: That’s right. The state of California requires that local municipalities and counties are prudent with their public dollars, which is totally understandable. But is there a way for us to be prudent and still allow us to leverage our public dollars to support our local economies? That’s what we’re going to be exploring with the state of California in the next year or so.

KERNAN: And how much money are we talking about here? How much money does San Francisco have invested in Bank of America, Wells Fargo, and…

AVALOS: And Union Bank. Our city budget is $6.8 billion, but then we have other investments that we have that on a yearly basis. I think are about $11 billion all together. Most of those dollars are in Bank of America, and part by Wells Fargo. We have many, many accounts in all these different banks, but the way that the city runs its financial transactions – a lot of that money is cleared out from these banks on a daily basis. The banks get the money and do transactions to pay our bills, to pay employees, they do all the contract work where money exchanges hands for the city, and then the money is cleared out to other institutions, where the money is invested – very low rate-of-return, but very stable investments.

So, you know, there’s a lot of research we’re going to have to do to crack the nut about how we create our own municipal bank. It’s not something that we’re going to be able to do in a few months time. And so given the fact that we have to change state law to be able to do it, we have a lot of time, a lot of room, to make sure that we do something right, we do it effective, we take steps to do it incrementally. It’s a radical idea, but one that will take a lot of effort and work to create.

KERNAN: And would the city make revenue off of this? I read that the bank of North Dakota made $300 billion in the past decade.

AVALOS: Yeah, the idea is that… is there a way that we could actually build or create a revenue stream through our local bank? That is certainly what we would like to achieve with this idea in San Francisco. North Dakota actually has a surplus where other states do not have surplus with their state budgets. And North Dakota also has a really low unemployment rate. People think North Dakota is just a very rural state, just a farming industry, but it actually has a lot of high tech and has a lot of other industries there as well.

KERNAN: Are there other risks to getting into the banking business?

AVALOS: Well, if you talk to the Chamber of Commerce, the Chamber of Commerce says, “If you pull your money out of these financial institutions then you’re going to force these institutions to go elsewhere, you’re going to lose jobs here in San Francisco.” And right now, that’s the biggest threat of creating any change in this city, is that you’re jeopardizing jobs. And it’s something that, as an elected official and a politician, I have to listen to that all the time and weigh how real that is, or not.

KERNAN: So even though this idea is a long way off, even if it were to be realized, I would imagine just floating is going to have the large banks begin lobbying against this idea. Is there a middle ground here where you could have some clout with the banks and their lending practices?

AVALOS: I have not yet reached out to the banks. I expect that we’ll start that process soon. I know that a lot of the banks feel somewhat put upon by the changes that are coming, that are being proposed, or the ideas that are being generated by the Occupy Wall Street movement and the idea that these banks have benefited from a federal bailout with our tax dollars. And a lot of people, the 99%, don’t feel that these banks have done enough to really support our local economy, to help support households from defaults and foreclosures, are not being flexible enough to support the 99%. That’s part of the dialogue.

So I think that gives me some ability and power to be able to come to the table with a lot of the banks and for the banks to start thinking about they could be more flexible. I understand there are huge constraints that the banks have as well about how they’re going to do their loans and about the whole loan crisis we have right now. We’re not doing a lot of lending right now with these banks. But certainly these banks have to respond to the pressure that’s coming up. They have to respond also to their responsibility, about how they use our public dollars to support people all over the country.

You can hear more of Supervisor Avalos’ thoughts on progressives in San Francisco, the mayor’s race, and the effectiveness of ranked choice voting, here.